Scottish Nationalism on the Rise. Unhappiness with Thatcher policies, wider European prospects fuel separatist demands. MIFFED AT MAGGIE

WHEN John McGrath's ``Border Warfare'' played to packed houses in Glasgow last month, the audiences were highly partisan. The play dramatized the often turbulent history of relations between Scotland and England, including a re-creation of the Scottish parliament that voted in 1707 to join with the English parliament in London.

Glasgow theatergoers were asked to vote their own preferences and every night the results were the same: They reversed the decision and opposed union with Britain by at least 10 to 1.

While perhaps not an accurate reading of public opinion, the informal theater poll in Glasgow registers the rise of Scottish nationalism that is now the dominant political issue north of the English border.

``There is no doubt at all that the majority of people are unhappy with the way Scotland is governed,'' says political activist Judy Steel, wife of David Steel who is a member of Parliament and a former leader of Britain's Liberal Party.

Scotland's unhappiness with rule from London has a long history. Its revival in the late 1980s has more to do with the free-market policies of Prime Minister Margaret Thatcher and the strengthening of the European Community (EC) than it does with historic border wars.

It is ironically set against the recovery of the Scottish economy after the slump in oil prices in the mid-1980s and a development boom in Scotland's largest city, Glasgow. While still high compared with England, unemployment is falling and government expenditures on Scotland have doubled in the past decade.

Scotland, however, sees itself as a working-class country, equalitarian and largely socialist. Even if Scots compete well in the ``enterprise culture'' promoted by Mrs. Thatcher, they rebel at attempts to turn their society into model of capitalism, especially under a government they do not support.

Scottish grievances include rule by a Conservative Party which retains only 10 seats out of 72 seats of Parliament that represent Scotland. The number of Conservative parliamentarians is so few that London must recruit ministers for Scottish affairs from outside.

Resentment against these English officials can run deep. Commenting in the Guardian newspaper, playwright McGrath wrote that Scotland is ``now ruled by a bunch of suave brigands who nobody voted for and nobody can do anything about ... ''

Although there is a revival of demands for self-determination in Scotland, support for independence is still limited. Advocates of independence, mainly the Scottish National Party, insist it is the only option if Scotland wants a say in its own affairs. ``Either the Scottish people are sovereign or the English Parliament is sovereign - it can't be both,'' says Chris McLean, spokesman for the Scottish Nationals.

But critics say that independence is a whim which ignores the economic realities of Scotland's remote geography and the benefits of union with Britain.

``I don't believe a majority of Scotland wants independence, they want devolution,'' says Douglas Sinclair, chief executive of the Ross and Cromarty District Council in the Scottish Highlands. Mr. Sinclair says that the recent push for self-government is the outcome of a steady centralization of power under Thatcher. ``Scotland is being very much sucked into the mainstream of Thatcherism,'' he says.

Scottish frustration with Thatcher's government is partly based on the perception that she lacks sympathy for the region. Mrs. Thatcher once said that if it had not been for Scotland and its large contingent of Labour parliamentarians, now at 49 members, Britain would not have experienced what she has called the ``dark tunnel of socialism.''

Among the Thatcher government's reforms, one that has stirred the most controversy is a new per capita tax, known as the community charge or ``poll tax.'' This month, the poll tax replaces property taxes as a source of local government revenue. Introduced in Scotland ahead of the rest of Britain, critics say the tax is unfair since it is levied without regard to income. Many Scottish citizens are refusing to pay their tax bills.

While Scotland is virtually united in distaste for the Thatcher government, it is deeply divided over what kind of government it should have. An unofficial Scottish Constitutional Convention began meeting last month to draft a proposal for an elected assembly within the United Kingdom. The convention is the first collective effort at home rule since a referendum in 1979 failed to capture the required 40 percent of the eligible voters.

``Scotland has the right to insist on articulating its own demands and grievances rather than have them articulated for it by a distant government utterly unrepresentative of Scotland,'' co-chairman of the convention David Steel told the meeting.

But the convention lacks support from both the Scottish National Party, which advocates independence from Britain, and the Conservative Party, which refuses to endorse any form of regional self-government.

``It's quite clear the convention is not going anywhere,'' says Margaret Ewing, a member of Parliament from the Scottish Nationals. ``They haven't worked out what they'll do if Mrs. Thatcher says no, and she has made it quite clear she will not approve any moves toward home rule.''

Thatcher's views on home rule are well known. In February she told an audience in Glasgow that Scotland was already gaining greater control over its own affairs under her free-market revolution and that any thought of breaking up the union was unacceptable.

Despite their minority position, the Scottish Nationals have been on the offensive. In a by-election last year, an outspoken Scottish Nationalist candidate, Jim Sillars, won a stunning victory over a Labour opponent. This success in the Labour stronghold of Govan raised questions about the Labour Party's ability to hold other so-called ``safe'' seats in Scotland. Another by-election this spring will again test nationalist strength.

Since Mr. Sillars's victory, the Scottish Nationals believe they have been riding a wave of popular support. They say that their slogan of ``independence within Europe'' has won over many voters who were afraid that an independent Scotland would suffer economic decline and political isolation.

With the EC acting as an economic safety net and with annual revenues from North Sea oil in excess of $6 billion, more people believe that independence for Scotland is a practical option, says party spokesman McLean.

He cites a recent poll commissioned by the Glasgow Herald newspaper and BBC Scotland which showed that 61 percent of the voters would prefer Scotland to be an independent member of the EC than to have its interests represented in Europe by London. Conservative and Labour supporters both dismiss such poll results, however, saying that they don't reflect a realistic assessment of Scotland's prospects separate from Britain.

``We firmly believe that independence would mean a huge loss of jobs and that devolution would mean another tier of government and higher taxes,'' says Alice Luce of the Scottish Conservative Party in Edinburgh.

Conservatives claim that other EC members would not be willing to see Britain break up since their own minorities might also press to break away. ``Fragment Europe and you destroy it,'' Thatcher said in Glasgow.

But the nationalists, who once opposed Britain's membership in the EC, now see Europe as Scotland's salvation. ``We're seeing Scotland in a new, wider and more relevant union with the rest of the EC as we go into the next century,'' McLean says.